APRA, ASIC drop regulatory programs to focus on coronavirus

APRA and ASIC suspend regulatory programs to allow banks to focus on the coronavirus crisis, or to protect consumers.

Australian Prudential Regulation Authority chair Wayne Byres.

The banking regulator has dumped its regulatory program for the year, urging banks, superannuation funds and insurers to pay their “fullest attention” to the spiralling coronavirus crisis.

The corporate regulator, ASIC, also put on the back burner a series of regulatory initiatives, such as closely monitoring large firms, to focus on protecting consumers and preventing law breaches.

In a short statement outlining the scuppering of its annual timetable, Australian Prudential Regulation Authority chairman Wayne Byres said the financial system was “strong and resilient”.

“But right now it is more important that banks, insurers and superannuation trustees – as well as APRA – devote their energy and resources to responding to the impact of COVID-19,” Mr Byres said.

Following a daylong meeting with other financial regulators on Friday, APRA said it would be “suspending the majority” of its regulatory work at least until the end of September so it can focus on ensuring the financial system remains capitalised and functional.

The Council of Financial Regulators — a group that includes the Reserve Bank, APRA, the Australian Securities and Investments Commission and Treasury — on Friday met with the chief executives and the chief risk officers of the big four banks to discuss further ways the banking sector could keep credit flowing into the economy.

The meeting, which was also attended by the Australian Financial Complaints Authority, came after Scott Morrison and Josh Frydenberg unveiled a $15 billion plan to keep the securitisation market functioning, the Australian Banking Association announced deferred mortgage repayments for stressed households and businesses, and the Reserve Bank launched a $90 billion business lending fund.

Following the banks’ announcement of support packages, with an option to defer repayments, APRA said it would write to all banks to advise them of the specific reporting treatment for loans that are subject to these arrangements.

It says banks are required to report and publicly disclose the nature of any repayment deferrals as well as the volume of loans impacted by coronavirus support packages.

ASIC steps back

Meanwhile the Australian Securities and Investments Commission will also suspend some monitoring programs because of the virus crisis.

Other than focusing on the challenges created by the coronavirus crisis its priorities would only be policing “the risk of significant consumer harm, serious breaches of the law, risks to market integrity and time-critical matters”.

ASIC will suspend its close and continuous monitoring program, which had embedded watchdog officers into the workplace of the major financial firms.

“ASIC will maintain its enforcement activities and continue to investigate and take action where the public interest warrants us to do so against any person or entity that breaks the law. However, it will focus on action necessary to prevent immediate consumer harm, egregious illegal conduct and other time critical matters,” the regulator said.

The Australian Office of Financial Management on Friday also met with council regulators to discuss how it will support the RBA’s unprecedented bond-buying program, which saw $5 billion injected into the sovereign bond market on Friday.

On Monday, APRA suspended all public consultations that are already underway or upcoming and said it would be redirecting its resources to monitoring “capital and liquidity” and “key financial settings”.

This would allow financial companies to “dedicate time and resources to maintaining their operations and supporting customers, while also enabling APRA to intensify its focus on monitoring and responding to the impact of a rapidly changing environment on entities’ financial and operational capacity”.

The Foreign Investment Review Board also said it would forgo withdrawal fees if companies awaiting a review of investment decisions pulled their application.

In a statement issued on Monday, following the meeting of the Council of Financial Regulators, the group of watchdogs said it was crucial that “over the coming months the financial system remains stable and resilient and that markets are open and orderly” to support the economy.

The council said it discussed the need for continued close engagement with international regulators and that APRA and ASIC indicated they would announce further plans to reprioritise their regulatory work and reduce the regulatory burden facing institutions in this difficult time.

ASIC said it was working with the government and other regulators to keep markets open, fair and efficient.

“ASIC has implemented measures to maintain operations and support and protect staff during this time. This includes implementing stringent hygiene and cleaning protocols, social distancing and flexible working arrangements,” the watchdog said.

ASIC also sent a warning across the bows of the insurance industry, saying it expected firms involved in handling insurance claims to “act with the utmost good faith” and to “communicate clearly and accurately to customers about their cover recognising the changing situation they may be facing”.